Sunday, August 6, 2017

The precursor to the EU was set up in 1958, as the
continent’s leaders vowed to make another war between them all but impossible.
The euro came in 1999, when a group of 11 countries jettisoned marks, francs
and lire and turned control of interest rates over to a new central bank. The
common currency’s scale provided exchange-rate stability and better access to
world markets. It did not, however, impose uniform financial discipline; to
avoid surrendering national sovereignty, politicians largely sidestepped a
unified approach to bank regulation and government spending. To the extent that
there were rules, they were flouted. The events that brought the euro to its
knees came during the global rout in 2009, when Greece came clean and said its
budget deficit was twice as wide as forecast. Investors started dumping assets
of the most indebted nations and borrowing costs soared. The shared euro made
it impossible to devalue individual currencies of weaker economies, limiting
options for recovery. Politicians lurched through bailouts for Greece, Ireland,
Portugal and Cyprus plus a rescue of banks in Spain. The panic fueled fears of
a breakup as fragile banks and their holdings of government bonds exposed the
common currency’s vulnerabilities. The firestorm abated in July 2012, when
European Central Bank President Mario Draghi pledged to do “whatever it takes”
to save the euro.